Stocks Continue To Show A Lack Of Direction - U.S. Commentary

3/27/2012 12:09 PM ET

With traders taking a break following yesterday's rally, stocks are turning in a lackluster performance in mid-day trading on Tuesday. The choppy trading comes despite the release of a disappointing report on consumer confidence.

The major averages have ticked to the upside in the past few minutes and are currently posting modest gains. The Dow is up 9.12 points or 0.1 percent at 13,250.75, the Nasdaq is up 7.09 points or 0.2 percent at 3,129.66 and the S&P 500 is up 1.26 points or 0.1 percent at 1,417.77.

The lack of direction being shown by stocks comes as traders seem reluctant to make any significant moves after Monday's rally drove the Nasdaq and the S&P 500 to multi-year closing highs.

While some analysts have suggested that the markets are overbought and need to stage a correction, traders have largely seemed reluctant to cash in on the recent gains amid concerns about missing out on any further upside.

In a potential sign of the reluctance to sell, stocks are largely holding on to yesterday's gains despite the release of a report from the Conference Board showing an unexpected drop in consumer confidence in the month of March.

The Conference Board said its consumer confidence index fell to 70.2 in March from an upwardly revised 71.6 in February. Economists had expected the index to edge up to 70.9 from the 70.8 originally reported for the previous month.

The unexpected pullback by the consumer confidence index came after it reached its highest level since coming in at 72.0 in February of 2011 in the previous month.

Lynn Franco, Director of the Conference Board Consumer Research Center, said, "The moderate decline was due solely to a less favorable short-term outlook, while consumers' assessment of current conditions, on the other hand, continued to improve."

A separate report from Standard & Poor's showed a continued drop in U.S. home prices in the month of January, with prices falling in line with economist estimates.

The report showed that the S&P/Case-Shiller 20-City Composite Home Price Index fell by an annual rate of 3.8 percent in January compared to a 4.1 percent year-over-year drop in December.

Among individual stocks, shares of Lennar (LEN) are up by 6 percent after the homebuilder reported first quarter earnings that fell year-over-year but came in above analyst estimates. The company also reported a 33 percent increase in new orders.

ISTA Pharma (ISTA) is also trading higher after announcing an agreement to be acquired by Bausch + Lomb for $9.10 per share in cash or a total of about $500 million. The deal is expected to close in the second quarter of 2012.

Meanwhile, for-profit education company Apollo Group (APOL) is down by 7.7 percent despite reporting better than expected second quarter results and reaffirming its full-year guidance.

Sector News

While most of the major sectors are showing only modest moves, considerable strength is visible among housing stocks. Reflecting the strength in the housing sector, the Philadelphia Housing Sector Index has surged up by 3 percent.

Lennar is helping to lead the sector higher, while M/I Homes (MHO) and PulteGroup (PHM) are also posting notable gains on the day.

Networking, chemical, and utilities stocks are also seeing moderate strength on the day, although buying interest remains subdued.

On the other hand, oil service stocks have come under pressure, dragging the Philadelphia Oil Service Index down by 1.9 percent. The weakness in the sector comes amid a modest decrease by the price of crude oil.

Health insurance stocks have also moved to the downside, giving back some ground after moving sharply higher in the previous session. The Morgan Stanley Healthcare Payor Index is down by 1.1 percent after ending Monday's trading up by 3.3 percent.

Meanwhile, the major European markets turned lower over the course of the trading day. While the German DAX Index closed just below the unchanged line, the U.K.'s FTSE 100 Index fell by 0.6 percent and the French CAC 40 Index dropped by 0.9 percent.

In the bond market, treasuries have moved to the upside, climbing further off their recent lows. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 4.4 basis points at 2.20 percent.